This video shows how the lessor should account for a sales-type lease with an unguaranteed residual value. When the residual value is not guaranteed, the lessor must reduce the sales revenue and cost of goods sold by the present value of the unguaranteed residual value. Because the sales revenue and cost of goods sold decrease by the same amount, this does not change the amount of gross profit recognized. However, the lessor will have to recognize a gain or a loss if the value of the leased item is different from the unguaranteed residual value at the end of the lease.